Closing Loopholes Update – Significant Changes

On 7 December 2023, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) passed both Houses with amendments’. We note that some content initially proposed to be included in the Bill has been delayed in a deal with the Cross Bench and is expected to be addressed early in 2024.

A significant amendment has been the introduction of what is essentially a “same job, same pay” approach to the labour hire economy. The Mining and Energy union describes same job same pay as follows:

“Large companies have used labour hire loopholes in Australia to pay some of their workforce less for doing the exact same job. This has held workers’ wages and conditions back while corporate profits have grown. Same Job Same Pay for labour hire workers will close the loophole and help wages rise.”

The Sydney Morning Herald reported:

“Business groups representing companies including BHP and Qantas, which both use labour hire, spent millions campaigning against the same job, same pay changes, which aim to ensure employers don’t undercut enterprise agreements by bringing in auxiliary workers on lower wages”.

So, what should you be aware of if you are a labour hire business or are dealing with a labour hire business? Below are some key considerations you need to be aware of.

Who do these changes apply to?

The Bill will apply to you if the following circumstances relate to you:

  1. Your business is an employer who directly or indirectly supplies one or more employees to a regulated host (examples of a regulated host could be a business or the Commonwealth of Australia etc.);
  2. the regulated host has a covered employment instrument (e.g., an enterprise agreement) that applies to its employees and would apply to the labour hire workers if they were directly employed by the regulated host; and
  3. the regulated host is not a small business (less than 15 employees).

If all three criteria are satisfied, these changes apply to you. As you can see, the changes do not apply simply to the big end of town like BHP and Qantas, they will apply to all businesses except those with less than 15 employees.

What if I supply employees to a regulated host?

Where the above criteria are satisfied then a regulated employee (the employees you supply), an employee of a regulated host, a representative organisation (e.g. a union) or the regulated host may apply to the Fair Work Commission (FWC) seeking an order that the regulated employee be paid the same rate as if they were directly hired by the regulated host.

Notwithstanding this, if the FWC is satisfied that the performance of work is for the provision of a service (rather than supply of labour) or making an order would be unfair or unreasonable, then the FWC will be prohibited from making the order.

When will these changes commence?

The regulated labour hire arrangement jurisdiction commenced on 15 December 2023.

While applications can now be made to FWC, if an order is made (which will be referred to as a regulated labour hire order), it will not come into force until 1 November 2024. The effect of the order will be that labour hire workers will be paid no less than if the labour hire workers were working directly for the host employer.

Our Recommendations/Up Next

While these changes will be pivotal for underpaid labour hire workers, it will be interesting to see how these changes impact smaller businesses, who could be ordered to match the wages of similar employees within a much larger organisation. If you are going to be caught by the above, we recommend you review your employee entitlements and how they compare with an applicable award and a regulated hosts’ workplace instrument (usually an enterprise agreement).

Over the coming months, we will provide an overview of additional key provisions of the Closing Loopholes Bill which include but is not limited to the criminalisation of wage theft and changes to the definition of a casual employee.

We expect further changes to the industrial relations regime will come into force next year and will require businesses to stay on the front foot. The Osborn Law Employment Team is here to support you and your business. If you would like to discuss anything further regarding the above or have any specific questions relevant to your workplace please contact our office on (02) 4927 2900.